The CAA’s Atol consultation has suggested greater use of trust accounts could be a way forward, and just last week, Abta said it would recognise trust accounts as a form of protection for their members.

So what are the strengths and weaknesses of trust accounts? A clear strength of a properly run trust account is that consumers’ money can only be used to pay for the holiday they have booked.

All money taken from the consumer is paid into the trust account and no money is received by the travel firm until all suppliers for that specific booking have been paid.

All suppliers paid in advance of travel need to be covered by insolvency insurance or a third-party Atol, and there needs to be insurance to cover repatriation and accommodation in the event of the insolvency of the travel organiser.

A further strength is the flexibility of trust. The amount of money in trust increases and reduces with the bookings taken. New travel firms do not need substantial equity or security to start trading as long as they can fund the necessary working capital until the holiday profits start coming in.

But trust accounts do have weaknesses. The independent trustee needs sophisticated systems to ensure they can reconcile all monies in and out of the trust account daily, down to specific bookings. I’m sure Abta will be ensuring the highest standards from trust providers.

The CAA proposals on the wider use of trust accounts are interesting, and suggest they see substantial strengths in the model.

But there are two points which may be worthy of wider discussion. Firstly, should there be limits on the payment of suppliers from trust in advance of travel? And secondly, should new rules on trust accounts only apply to licensable bookings? Those regulated under Atol by the CAA, in other words.

Restricting the use of consumer monies in trust before travel would have a disproportionate effect on small travel firms who cannot insist on credit from suppliers. This would be unfortunate both in restricting new entrants and competition in the market, and because it does not address the major problem that led to the consultation – the insolvencies of of Monarch and Thomas Cook, large travel providers with airlines.

In our experience, few problems arise in paying suppliers in advance of travel as long as there is insurance in place and no profit is paid out until all suppliers have been paid.

‘Consistency’

It is unfair to criticise the CAA for suggesting wider use of trust accounts only for licensable bookings. They are the only ones they regulate.

But our view is that there should be the same protection for both licensable and non-licensable bookings. Separating payments coming in from card companies or online into licensable or non-licensable bookings often proves very challenging for travel firms.

And if it is difficult for them, checking is still more complicated for the regulator.

Let us hope, then, that the review by the Department of Business, Energy and Industrial Strategy of the legislation relating to travel can bring more consistency across the industry.

However, with all the above said, the one thing we are all certain of is that the extension of choice will absolutely empower all UK travel businesses to move forward with strength.

Tom Clay is financial director of Protected Trust Services.